Benefits

Helping Employees With College Debt and Savings

Offering workers help in managing or even paying back their student loans is a benefit valued by employees and will ultimately help them save for retirement.

By Lee Barney editors@plansponsor.com | June 13, 2017
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Be it carrying student loan debt well into middle age or saving for a child’s college education, Americans are increasingly finding that funding a college degree puts a major drag on retirement saving.

While young adults may delay saving for retirement because of crushing student loans, and parents may consider it their duty to fund their child’s higher learning, people should not lose sight of their own needs in retirement, advisers say.

“Student loan debt is the No. 1 baggage that people come in with when they start a career,” notes James Sullivan, vice president of Essex Financial in Essex, Connecticut. “A monthly payment of $600 or $800—more than a car payment—can be crippling.”

Indeed, a survey by IonTuition found that 70% of students graduate from college with student loan debt averaging $37,172 and that people carry this debt well into their adult years; 44% of Millennials carry student loan debt, while the same is true for 26% of Generation X and 13% of Baby Boomers. IonTuition, in fact, discovered a direct link between student loan debt and retirement savings, finding that people with no student loans have a median retirement savings balance of $56,000 but that people with student loans have a median balance of $31,000.

The majority of the borrowers are paying their loans back over decades, notes Mike Brown, managing director of Nitro, in Wilmington, Delaware. While only large companies have begun offering workers help in managing or even paying back their student loans, Brown hopes this benefit will resonate among more employers. “It’s a tremendous way to attract talent,” he says. 

The IonTuition survey found that only 4% of employers provide assistance with student loan repayment but that 76% of Americans think it would be an excellent benefit, 36% would prefer student loan repayment benefits over a 401(k), and 29% would prefer these benefits over health benefits.

NEXT: College savings

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